California math – borrow $1, repay $10

This story should be in the “urban legend” category – but it’s not. It’s in the “Ripley’s Believe It or Not” category. Borrow a dollar, repay ten – or in this case, borrow $100 million, repay a billion. Now there’s a deal!

Poway school district just north of San Diego bonded for $105 million to finish revamping older schools. The deal they made, though, is mind-boggling in its insanity and breath-taking in its audacity. The loan will be repaid at an unbelievable 10-to-1 margin – but hey – don’t worry! The billion dollars in repayment doesn’t start for 20 years.

2008 was the year Poway bonded – with promises not to increase taxes. Instead, they asked voters if they would be willing to extend the life of their existing property taxes by 11 to 14 years. Voters agreed. But – they didn’t read the fine print. Oh wait – there was no fine print. The 2200-word statement on the ballot doesn’t mention the details of the bond repayment. The details they left off include: no payments for 2 decades – woohoo! When they start, however, the payments are about $50 million a year, meaning that every two years, they’ll repay the original amount of the loan. Times ten. Oh, and no chance of renegotiating the terms or early repayment. The first inkling of what it really meant came earlier this year and now, finally, news stories are picking it up. (Fox, NBC, Bloomberg, and more)

Taxpayers are outraged – rightly so. But Poway officials say it’s important to look at the big picture. What they really mean is “we want to get re-elected so we’ll kick the can down the road to some future generation while we pretend we can afford this.” Todd Gutschow, Poway Unified board member, said “We could have authorized more taxes, it would just have been breaking the promises we made to the community.” Like paying $900 million in interest is keeping that promise?…. Oh, and that $900 million? Well, that “no new taxes” thing was really just a suggestion, not a promise….

Well, let’s see: at $6,000 per pupil per year, we’re spending $180,000 for a classroom of thirty. Please help us find the missing $100,000, then we can move on from there and talk about why we need to raise taxes.